Sebi relaxes infra investment trust rules to draw business houses

This will remove the restriction on the SPV to invest in other SPVs, thus allowing InvITs to invest in a holding company which subsequently holds stake in SPVs.

To help the newly-introduced Infrastructure Investment Trusts (InvITs) gain further traction, markets watchdog Sebi on proposed easing of norms for these instruments, including by reducing the mandatory sponsor holding to 10 per cent, from the current 25 per cent.

The Securities and Exchange Board of India (Sebi), in 2014, had introduced InvITs — an investment vehicle which would enable promoters to monetize completed assets — to make it easier to raise funds for infrastructure projects. However, InvITs have failed to get desired attention so far and only four applications have been received till now for setting up these Trusts. Out of these, two applications have already been approved by Sebi.

Now, the regulator has decided to revamp InvITs regulations after receiving recommendations from the industry. It floated today a consultation paper proposing amendments to InvITs regulations. It has now also proposed to allow InvITs to invest in two-level SPV (special purpose vehicle).

This will remove the restriction on the SPV to invest in other SPVs, thus allowing InvITs to invest in a holding company which subsequently holds stake in SPVs.

Currently, InvITs holds a controlling stake in SPVs that do not invest in other SPVs.

Besides, Sebi has proposed reducing the mandatory sponsor holding in InvITs to 10 per cent of the total units of such units on a post-issue basis for a period of three years, from the current requirement of 25 per cent.

The current requirement may limit monetisation for sponsors and reduce release of capital for them. Further, in certain circumstances, it may lead to sponsors putting money out of their own pocket in the InvITs to maintain the required 25 per cent stake.

The regulator also proposed to increase the number of sponsors to five, from the current requirement of three.